Buyers Guide for Property in Tenerife
Purchasing a property in Tenerife might well represent the fulfilment of a life-long dream and at “LOOK TENERIFE PROPERTY” we will do our best to find your ideal property and help to make your dreams come true.
Through our experience we offer you the best and most comprehensive pre and post sale assistance, guiding you through the necessary steps in order to make your purchase and /or investment as smooth and hassle-free as it can possibly be.
In the following pages you will find a complete guide to purchasing property in Tenerife.
Acquiring a property abroad needn’t be either difficult or problematic just allow our team to help you every step of the way.
Please let us know what you are looking for and we will be delighted to provide you with a list of properties that meet your criteria.
We will be more than happy to arrange viewings for any of the properties that you feel will be suitable.
Once a property has been chosen, the purchase price and terms will have to be negotiated with the seller.
Such negotiations are usually carried out by our selves directly from our offices, but should you choose to appoint a lawyer, he/she can carry out such negotiations on your behalf.
If you wish to know more about this subject go to our choosing a lawyer and legal advice sections.
Once a verbal agreement has been reached, you will be expected to formalize your offer by signing a private purchase agreement contract and making a deposit payment.
Please go to our private purchase agreement section for further details.
CHOOSING A LAWYER
You are not obliged to use a lawyer for your property purchase in Tenerife. We will, on your behalf, request a ‘nota simple’ which is a document that displays the current status of the property (whether there are any outstanding charges, etc.). Most importantly the Notary will check and confirm all legalities, and the terms and conditions of the transaction. However, should you wish to use the services of a solicitor then there are many multi-lingual lawyers in the south of the island and we also have our collaborating lawyer that we can recommend.
PRIVATE PURCHASE AGREEMENT
Once you have chosen the property you wish to acquire, a private purchase agreement (Contrato de CompraVenta) will be drawn up by our selves or an appointed lawyer.
With such a contract both the vendor and purchaser commit themselves to finalizing the purchase at a later date; it is therefore a serious document, which should not be underestimated and consequently, LTP will provide you with a translation and clearly explain its contents in order that you fully understand it.
Contracts legally are drawn up in Spanish and should be accompanied by an English translation.
A typical contract will specify details of the purchaser and vendor, being these the same appearing in the Title Deeds (Escritura), purchase price ( which includes sales commissions, normally this payment is invoiced to the vendor, but under certain circumstances ie: bank repossessions this can be invoiced to the purchaser, but is paid from the agreed sales price ) method of payment, period of contract, guarantee that the property is transferred free of any encumbrances such as taxes, tenants or occupants etc., and stating on whom the responsibility to pay the charges and fees deriving from the purchases will fall. It will also stipulate the penalties for non-fulfilment.
Upon signing the private agreement a deposit usually equivalent to the 10% of the purchase price will have to be paid as a sign of commitment on behalf of the purchaser.
Contracts for new developments are slightly more complex and contain numerous clauses with reference to the legality of the land, location of development and ownership, building permissions, date of completion and are drawn up directly by the developer.
Below is a list of the services supplied by the legal representative regards post and pre notary services they would carry out on your behalf relating to your Real Estate purchase
- Legal and Economic counsel
- Verification of all property related documents
- Verification of all registry charges
- Verification of all local rates: ie I.B.I & Basura etc
- Verification of community fees
- Preparation of notary contract and signing date
- Translation of notary contract at signing in notary
- Register the property in the land registry after purchase
- Collect the final Escitura from notary
- Property transfer tax and declaration
- Non resident tax retention and payment
- Registration of the notary contract at the land registry
- Pickup the land registration from the land property registrar
- Inform the land office ( cadastre ) of the change of ownership
- Inform the relevant community office of the change of ownership
- Inform Unelco of change of ownership ( electric company ) Connect to this service for new builds can take upto 7 days
- Inform Entamansur of change of ownership ( water company ) Connect to this service for new builds can take upto 7 days
FINANCING THE PROPERTY & BANK ACCOUNTS
Applying for a Mortgage is an easy process with LTP as we work with several of the major Banks in Spain. We will advise you on the best rates available with our banks here in Tenerife.
• Approximately 260 Euros for a property valuation.
• Approximately 1% mortgage opening commission.
• Insurance, varying from 120 – 240 Euros per year.
• A fee for the Notary & Registration of the mortgage.
Provided you supply the requested financial information, which is very straightforward, the mortgage can be effective within 15 to 30 working days.
You will need to open a non-resident or resident bank account here in Tenerife, to facilitate the transfer of funds prior to signing at the notary, bank transfers can take between 7-14 days so make sure you allow plenty of time.
SPANISH IDENTIFICATION NUMBER (NIE)
A N.I.E. or Numero de Identidad de Extranjero, is fundamental when you purchase a property in Tenerife and has to be applied for at the local Police station prior to going to Notary for final completion. A small stamp duty charge of 9€ is payable at the bank prior to submitting the application.
Residents and non-residents alike are obliged to pay taxes to Hacienda (Spanish Tax Authorities). In order to do this a fiscal representative or lawyer can be appointed.
A sale is completed when the Title Deeds are signed by both parties before the “Notario” Notary.
The Notary is an official appointed by the government and comparable to a judge, who ensures that all the paperwork has been drawn up properly and that the property is free of debts and encumbrances.
The Title Deeds are drawn up in Spanish and are translated by an official translator before being signed to assure that all personal details are correct and that the parties fully understand the nature of the transaction and the type of document that is being signed.
Once signed at the Notary offices, the Title Deeds “Escritura” must be presented in the Land Registry office where the new owner’s details are registered.
This process takes approximately one month.
LTP will pick up the Deeds and make them available for the new owners collection from our office at the customer’s convenience.
LTP or the nominated lawyer will also assist in transferring all billings and standing orders referring to payments for local rates, community fees, electricity, water, etc into the new owner’s name. Please note that with properties over 20 yrs old Unelco may request that a new electrical bolletin is issued, and this may come at an expense normally around 350€ ( but this cannot be given as an exact figure as there are many differing elements that can change this figure )
ESTATE AGENTS COMMISSIONS – how we are paid
Estate agents in Tenerife are by and large paid commission by the property seller. In standard re-sales this is always the case although one could argue that the buyer is actually paying if the seller has given the agency a net price to which they should add their own commission to (as is common practice.) For example, a property owner may request 100,000€ net back to them in which case the agency will set the price at 105,000€ (100,000€ plus 5% commission.) So the agency effectively “adds” their commission. This will be the price which will appear on the title deed at the notary and the agency will submit an invoice for their commission to the seller. Commission is normally around 5% on prices of 100,000€ and above. On sales below 100,000€ it can be negotiated with the owner or a fixed fee may be charged. In these case the buyer will never be privy to the amount of commission involved.
With bank repossessions it is a slightly different process. Our agency is given the property usually at a fixed and non-negotiable price by the bank, we´ll use 100,000€ as an example again. So on a price of 100,000€ we are told to simply “add your own commission.” This is identical to a private seller and would result in a price of 105,000€. However there is one difference and that is that the bank will not allow for the commission element to form part of the final price which will appear on the purchase deed. So whilst the total price to the buyer is 105,000€, the purchase deed may only show 100,000€. The 5,000€ commission would be retained from the proceeds of the sale and we would provide an invoice for this charge post completion to the buyer. Although from the paperwork it looks as though the buyer is paying more than they should be (5%/5,000€ more) there is no difference between this and a standard resale other than an extra piece of paper at the end of the process and no difference in the overall amount they pay for the property.
Our maximum commission on repossessions of 100,000€ or more is 5%. An additional charge of 1% of the mortgage amount is added where a mortgage is obtained for the purchase. We do not negotiate on commissions as we see no reason why we should make less commission that any other estate agent in Tenerife – please do not ask!
The work required to sell a repossession with a mortgage of up to 100% is far greater than the work involved in a standard resale. Even so, we do not charge anymore for a repossession sale. Regardless of whether or not the commission is included in the price on the deed or is charged separately, the price the property is advertised at on our website will always be inclusive of any commissions. And that is the price a buyer should concern themselves with.
FEES AND TAXES
A number of taxes and legal fees derive from the purchase of a property.
Prior to going to notary LTP or the nominated legal representative will provide an estimate of such costs generally known as “closing costs”.
The closing costs usually sum up to between 8 and 10 per cent of the purchase price and they consist of:
• Transfer Tax (IGIC) at present 5% of the official value of the property if purchasing a new property from a developer or 6.5% when purchasing a resale.
• Legal documentation tax (Impuestos sobre actos jurídicos documentales, AJD) at normally 0.75%
• Plus Valia Tax the increased value of the land, which is calculated at various rates on the increasing annual value since the previous sale.
Legally the vendor is liable for the “Plus Valia” tax but in practice the purchaser is often asked to pay all fees & taxes for transferring the property.
• Notary Fee for drawing up the title deeds and researching the property.
• Land Registry Fee final registration of new owner’s details.
• Cheque drawdown ie: amount the bank will charge to prepare the bankers draft for the purchase, varies from 0.25% to 0.50% of the cheque value
Whether you are purchasing or selling a property, LTP shall walk you through the process, step by step assuring your best interests at all times.
A time may come when you wish to sell your property. As a non-resident you will have to pay 3% of the declared value as a retention to “Hacienda” the Spanish Tax Office, this is to cover any public or private debts that could be outstanding.
Provided that your accounts are up to date, you can claim most of the retained monies back within 5 to 6 months.
RENTING YOUR PROPERTY ( please see section re letting laws )
If you do not intend to use the property you are acquiring all year round, you might choose to rent it out.
If this is the case, there are a few things you need to know and take into consideration.
There are two main types of developments in the south of Tenerife:
If you choose to purchase in a residential complex you should consider the fact that short term holiday lettings in such a community would not be permitted.
If you are considering holiday letting you should look into acquiring your property in a complex registered with the Ministry of Tourism.
On the other hand medium and long-term rentals (from three months onwards) are allowed in all complexes.
The practicalities connected with letting your property (such as acquiring and screening your tenants, signing contracts, collecting deposit and rental monies, cleaning and maintaining the property, changing the laundry, etc.) can be dealt with through a management company such as TPN Rental Department or with an exploitation company should there be one already present in the complex.
COMMUNITY OF OWNERS
Apartments and villas that form part of a building complex will generally be subject to the ‘Law of Horizontal Division’. These laws regulate and protect the interests of the various owners of property, i.e. ‘the community’, on that complex. It requires that a ‘Community of Owners’ be formed to manage the running of the complex. Initially, the builder usually forms this Community when the construction is first completed. The total costs of running the complex are shared between the owners, usually based on their individual ‘area of ownership’ as a fraction of the total area of the properties. This fraction of the total ownership is the owners ‘quota’ and is used as a basis for calculating the owner’s share of the community fees and for assigning ‘voting power’ at the Annual General Meeting.
The purpose of a Community is to provide and maintain the various services required by any community. The supply of water, electricity, satellite TV, swimming pool maintenance, communal lighting and cleaning services, etc, all need to be implemented, scheduled and paid for. Although individuals within the community can meet these tasks, most complexes appoint a professional ‘Administrator’ to take care of this. The President and Committee members should hold regular meetings to consider the needs and requests of other owners, and then direct the Administrator accordingly.
MAKING A WILL
Nobody likes to talk about wills, implying as they do, the departure of a beloved one….unfortunately when the unexpected happens it is imperative to have made provisions to make sure that your assets will be distributed in accordance with your wishes.
Spanish assets can be incorporated into a British will but this can cause a great deal of time-consuming negotiations.
It is therefore easier and highly recommended to draw up a Spanish will, a rather straightforward and inexpensive document that our staff can prepare and present to the authorities.
As far as the common parts of the urbanization or Community of Owners are concerned, the Owners Association will have arranged an insurance that will cover the communal areas.
Although such insurance might cover privately owned portions of the building, under no circumstances will it cover your contents.
In order to protect your home and your investment you are advised to take up a comprehensive “building and contents” insurance.
Due to our collaboration with the insurance agents, Israel Cabrera, who have offices in Los Cristianos, Costa del Silencio and Valle San Lorenzo, you are guaranteed to receive professional advise either by them directly or through the staff at LTP on all insurance matters, including life, car, pet, etc.